Down and out for the Pound

7 July, 2016

Grace Rae

In the wake of the UK vote to leave the European Union, we have seen the resignation of our prime minister, our politicians bash each other over claims made during the referendum campaign, and continued government uncertainly as we await a new PM to be announced in September. Although we may see some positive relief when a new Prime Minister is selected, this verdict is still 2 months away and it is fairly likely that any prospective gains made at that time will be recovering further lost ground between now and then. Then there is the subject of the new PM triggering Article 50, which again is likely to have a Sterling negative effect as it confirms the beginning of the UK’s official exit from the EU.

This week during the Bank of England’s financial stability report Mary Carney said that “the UK’s financial stability is challenging” and has suggested that there is likely to be further quantitative easing and an interest rate cut to help stabilize the economy. This is due to be announced a week today and should we see either being initiated there is a high chance that rates will fall further.

Investor confidence in the UK economy is diminishing and hence causing rates to fall across the board. A recent report by Bloomberg has posted that the pound has been the biggest loser from Britain’s decision to leave the EU, and almost all the analysts who’ve changed their forecasts since the referendum are expecting the currency to remain weak. Most economists are predicting the bottom of the market to be between 6-12 months away so it could conceivably be 18 months to 2 years before we are seeing better exchange rates again.

Although this seem very doom and gloom for the pound, this is very positive for those looking to import their funds to the UK. Any clients selling overseas property and looking to repatriate your fund back to the UK now is a great time to do so.

This morning in the US the central bank released their FOMC minutes, with the outcome that the central bank should will wait to see more convincing evidence that inflation is closer to the Fed’s 2% target before considering another short-term interest rate rise.

If you are concerned and want to discuss you options to secure an upcoming transfer then please do get in touch an one of our friendly broker can assist and offer some support by calling 01923 725725 today.

Today’s Data:
08.30 GBP Halifax house prices & Industrial and manufacturing production
09:30 GBP Industrial & Manufacturing production
12.30 ECB Monetary policy meeting accounts
13:30 USD Continuing jobless claims
15.00 CAD Ivey Purchasing managers Index
15:00 GBP NIESR GDP Estimate.